John is proud of his 'learning as you go approach'. Since his early days in the industry, John enjoys reworking on fridges for fixing problems. Often Fridges-R-Fun products display problems on the welding between heat- exchanging pipes and the compressor. Also, it is not uncommon having customers requesting repairs or replacements due to problems with their fridges during the 5 years warranty.

John and Paul are concerned that Fridges-R-Fun is wasting too much money. So, Paul has hired Ringo for doing some management accounting. (George the Plumber did not last a month in the job). Ringo is a qualified management accountant and is keen to use his knowledge to assist Fridges-R-Fun.

Ringo reviewed the quality costs activities (Year 1) and noted that Fridges-R-Fun has been spending too much money on warranties. With the support of both John and Paul, Ringo decided to implement the following changes:

• Develop a new system for streamlining the assembly line.
• Provide technical support to suppliers for minimising the chances of receiving faulty material.
• Field testing of fridges at customers' sites.
• Inspection of fridges on assembling line.

Table 1 - Quality Costs Activity Year 1 Year 2 Year 3 Systems development $ 200 $ 100 Technical support to suppliers of compressors $ $ 150 $ 150 Technical support to suppliers of pipes S 100 $ 100 Field testing at customers' sites $ 250 $ 250 Inspection on assembling line S 500 $ 500 Rework on assembling line 500 $ 100 $ Warranty repairs of fridges S 700 $ 600 $ 500 Warranty replacements of fridges $ 1,500 $ 1,300 $ 1,100 Total quality costs $ 2,700 $ 3,200 $ 2,700